Offerpad is the newest Home iBuying company to join the SPAC Frenzy

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Numerous iBuying companies entered the public markets last year Open door (NASDAQ: OPEN) is one of the most prominent participants. This company merged last year with Chamath Palihapitiya Special Purpose Acquisition Company (SPAC), Social Capital Hedosophia II.

Also leading real estate platform Zillow (NASDAQ: Z) (NASDAQ: ZG) entered the iBuying market, where a company makes a cash offer to a homeowner for a faster transaction in hopes of flipping the property after renovations and selling it for a good profit, a few Years ago. There is a new iBuying company preparing to go public: Offerpad.

Why is SPNV being merged with Offerpad?

Source: Getty Images

Offerpad was founded in 2015 and currently operates in over 900 cities in 16 markets. The company has agreed to merge Acquisition company of Supernova Partners (NYSE: SPNV), a SPAC founded by Zillow co-founder and former CEO Spencer Rascoff.

Homeowners can request a cash quote for their homes on the Offerpad tech platform in minutes and expect to receive one for free within 24 hours. Alternatively, the homeowner can use a variety of Offerpad services to instead list their homes while keeping a backup offer in their back pocket.

Offerpad has carried out around 7 billion transactions to date. The company estimates it will have sales of $ 1.1 billion in 2020 and sales will grow to $ 1.4 billion by 2021. Offerpad expects to acquire nearly 6,500 homes and sell over 5,600 homes this year.

SPAC details of the Offerpad

The deal values ​​Offerpad at approximately $ 3 billion in post-money equity. Supernova has $ 403 million in cash in its escrow account following its IPO last year, while SPAC has allocated an additional $ 200 million for PIPE (private investment in public equity) funding. Supernova’s subsidiaries will bring in an additional $ 50 million.

When you add it all up, Offerpad receives approximately $ 600 million in net proceeds after paying off some debt and covering various transaction costs. Supernova’s public investors will own approximately 12% of the combined company upon completion of the merger, which is expected in the second or third quarter.

The opportunities ahead of us

Offerpad estimates that the total addressable market is $ 1.6 trillion, while iBuying and online penetration account for less than 1% of that opportunity. The company claims to be more capital efficient than bigger competitors like Opendoor or Zillow. Over time, Offerpad also became more efficient as a lot of time was spent on renovations, optimizing its workforce and standardizing projects.

By the end of 2021, Offerpad plans to operate in 19 markets, with each market generating $ 500 million in revenue. In the long term, the company hopes to eventually operate in 48 different markets, gaining 4% market share for each for annual sales of $ 23 billion. Growth is expected to accelerate in the future as Offerpad expands into 5, 10 and 20 new markets over the next three years.

SPNV saw a muted reaction with stocks slightly above $ 10 per share, but Offerpad’s public debut has a lot going for it.

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